World Bank Retains India’s Growth Forecast at 6.3% for FY26

On June 10, 2025, the World Bank reaffirmed India’s GDP growth projection at 6.3% for FY26, underscoring India’s position as the fastest-growing major economy despite a modest downgrade from earlier estimates.

This outlook reflects a services-led expansion, contained inflation, and ongoing fiscal consolidation amid global uncertainties.

Services Activity and Exports

The World Bank expects India’s growth to be supported by robust services activity, with IT, financial services, and tourism driving demand. While exports face headwinds from weaker trading partners and rising global trade barriers, services are likely to offset some export slowdown. The report noted that exports were dampened but not derailed, with digital services and software exports providing a cushion.

Inflation Outlook

Inflation in India is projected to remain within a comfortable range. RBI’s latest forecasts align closely, with CPI expected near 3.7% for FY26, down from 4% earlier. April’s inflation had eased to a five-year low of 3.2%, giving room for accommodative policy even as global commodity prices remain volatile :contentReference[oaicite:2]{index=2}.

Fiscal Consolidation

Fiscal discipline remains central. The World Bank anticipates gradual reduction in India’s debt-to-GDP ratio as tax revenues grow and current expenditures are managed prudently. Continued reforms in subsidy rationalization and enhanced revenue mobilization underpin sustainable public finances amid investment needs in infrastructure and social sectors :contentReference[oaicite:3]{index=3}.

Global Headwinds and Risks

Global growth is slowing, with the World Bank projecting a 0.5 percentage point dip to 2.3% for non-Asian economies, hampered by trade tensions and policy uncertainties. Over 60% of developing economies may see slower growth in 2025. India must navigate these external risks, including potential export slowdowns and financial volatility :contentReference[oaicite:4]{index=4}.

RBI’s Alignment

The Reserve Bank of India has maintained its FY26 growth outlook around 6.5%, signaling confidence in domestic demand and policy support. RBI’s accommodative stance, backed by low inflation, aims to stimulate credit growth, particularly in rural and MSME sectors. Coordination between fiscal and monetary policies will be crucial to sustain momentum:contentReference[oaicite:5]{index=5}.

Implications for Investors and Businesses

• Domestic Demand Play: Sectors like consumer discretionary, financial services, and technology may benefit from robust services expansion.
• Export Caution: Companies reliant on global demand should hedge currency and diversify markets, focusing on digital exports.
• Fiscal Reforms: Infrastructure and green investments may gain traction as government balances consolidation with growth-support measures.
• Policy Watch: Monitor RBI policy updates and government budgets for signals on stimulus or tightening, especially if inflation trends shift.

Conclusion

India’s retention of a 6.3% growth forecast for FY26 by the World Bank reaffirms the resilience of its economy, driven by services and prudent policy. While global headwinds persist, India’s inflation control and fiscal consolidation create a stable backdrop. Investors and businesses should position themselves for domestic consumption growth, remain cautious about export dependencies, and closely track policy developments.